Are UK Property Price Rises About To Fall?

Is The UK Property Market Just Experiencing
A Seasonal Slowdown Or Is It Something Worse?

There are a lot of reports in the media attempting to suggest that the UK property market is doomed to failure, with the latest House Price Indices (HPI) published by mortgage lenders suggesting that the UK property market is slowing, however there are fears that it might be in more serious trouble.

Halifax latest figures show that property prices in the three months prior to September 2014 were 2.7% higher than in the preceding quarter but there was an average 0.6% property price rise across the UK during September, resulting in an average property price of £187,188 (GBP).

Halifax say that this is the second successive decline in the quarterly rate and predict that the annual house price growth rate has already peaked at 10% and future growth will be at a considerably slower pace. Halifax chief economist, Martin Ellis, stated: “The recent rapid rise in house prices in some parts of the UK, earnings growth that remains below consumer price inflation and the possibility of an interest rate rise over the coming months, appear to have tempered housing demand. A moderation in growth looks likely during the remainder of 2014 and into next year as supply and demand become increasingly better balanced.”

Meanwhile homeowner confidence in the continued growth of UK house prices has fallen to a 15-month low according to Zoopla.

The latest Housing Market Sentiment Survey conducted by Zoopla suggests that confidence in the continued growth of UK property prices has dropped to a 15 month low

Zoopla surveyed 6,746 property owners and discovered a 4% drop in the proportion of people expecting prices in their area to continue to increase over the next six months, falling from 92% three months ago to 88%, the lowest figure it has recorded since July 2013.

Property owners in the East of England are among the UK’s most optimistic with 91% expecting property values to increase over the next six months; however, property owners in the South West are becoming increasingly pessimistic with confidence falling from 95% recorded earlier this year to just 85%.

The implementation of stricter mortgage affordability criteria for borrowers has also had a dramatic effect on public perception, with 39% of property owning respondents surveyed stating that they thought it would be more difficult to get a mortgage now than it was earlier in the year.

Zoopla spokesman, Lawrence Hall, responded to the survey’s findings stating: “UK property market signals are harder to decipher at the moment than they were a few months ago. The coming months will be crucial to determine if the housing market recovery has stalled or simply paused for breath.”

Data gathered from the UK’s second largest mortgage lender, Nationwide, roughly corresponds with the data released by Halifax, showing that the average price of a residential property in the UK fell by 0.2% in September, down from £189,306 (GBP) the preceding month.

As a consequence of the month-on-month drop, the annual rate of property price inflation decreased from 11% in August to 9.4% in September.

On a quarterly basis, Nationwide’s figures reveal that all 13 regions in the UK witnessed property price rises in the third quarter of this year, with the national average increasing quarter-on-quarter by 1.5% to £188,810 (GBP), an increase of 10.5% compared to the same quarter of 2013, despite the monthly dip in values.

Mortgage Market Review Hits UK Property Market

The pessimism doesn’t end there, with the International Monetary Fund (IMF) stating in its half-yearly outlook on the global economy, that they still have reservations over whether or not the Mortgage Market Review has done enough to restrict the demand for residential property in order to stabilise house prices in the long term, suggesting that the Bank of England may need to raise interest rates if there are signs that the UK’s housing market is again likely to develop a bubble.

Even the Centre for Economics and Business Research (CEBR) are getting in on the doom mongering, stating that although property prices are expected to rise by 7.8% this year, more than double the 3.5% national average increase last year making 2014 the year of the largest rise in home values since the financial crisis hit in 2007.

After 3 years of soaring prices the CEBR reckons that the UK property market is about to reach a turning point, warning that property prices are expected to slip by 0.8% during 2015 as the property market readjusts to getting ahead of itself in the early months of this year.

The CEBR also reckons that young property buyers risk being priced out of the rising market, while an expected rise in interest rates will startle prospective property owners.

Rightmove seem to be the only property portal predicting some good news for the UK property market as they reckon that average property prices in the UK are set to increase by 30% within the next five years.

Rightmove say that average property prices will rise between 33 – 37% In London and the South East by 2019, but the North West will only manage an increase of just 24%.

The optimistic new forecast comes from the collaboration between Rightmove and forecasting consultancy Oxford Economics, and describes itself as the most comprehensive house price forecast of its kind ever created, based on property and economic data taking into account both property asking and sold prices, surveyor valuations as well as using analytics from the Oxford Economics’ own forecasting models rather than relying public opinion and short-term residential property market factors.

The data suggests that the majority of the best performing areas will all be within an easy commuting distance of London, with property values in cities like Southampton predicted to increase by 43%. Luton property prices are predicted to be up 41% and Brighton, up by 41% with the Home Counties and outer boroughs also set to benefit from the ripple effect after a year of strong price increases in London, while northern cities of Carlisle and Manchester are predicted to see property price increases of 17 and 19% respectively.